Dario Durigan, who started his duty as Minister of Finance in Brazil in March, has suspended new tax plans, especially for cryptocurrency transactions, for now. Due to the country’s election atmosphere and possible political tensions, the public consultation process on the regulation of some crypto transfers under the financial transactions tax (IOF) has been put on hold for now.
New Minister Prioritizes Microeconomic Reforms
Dario Durigan took a different route in economic management after taking over from Fernando Haddad in March. It is stated that Durigan put aside some of the high-profile changes initiated by the previous minister and gave priority to economic steps at the micro level. Being an election year and the possibility of high tensions with Congress caused the new regulations to be spread over time.
The recently postponed draft regulation had brought forward the classification of certain types of cryptocurrency transactions as “foreign exchange transactions”. IOF rates applicable to foreign exchange transactions in Brazil vary depending on the type of transaction, starting from 0.38 percent and reaching up to 3.5 percent for card expenditures and transfers abroad. There is a separate rate of 1.1 percent for international investments.
Harsh Reaction Rising from Industry Representatives
Leading industry associations operating in the crypto, fintech and payments ecosystem in Brazil were quick to react against the controversial regulation. Organizations such as ABcripto, ABFintechs, Abracam, ABToken and Zetta published a joint statement on behalf of more than 850 companies in total.
In this statement, it was pointed out that applying IOF to stablecoin transactions would be contrary to both the Brazilian Constitution and the Virtual Assets Law of 2022.
Industry representatives stated that stablecoins cannot be considered in the same status as existing fiat currencies and cannot be classified as foreign exchange transactions through administrative regulations. While serious legal objections have risen against the bill regarding tax regulation, it has been revealed that the current legal framework of cryptocurrency markets in the country is not clear for the sector.
The tax issue first came to the public agenda in February. At that time, the Central Bank of Brazil announced that stablecoin transactions could be evaluated within the scope of foreign exchange regulations, providing a new basis for evaluation to the Ministry of Finance and tax authorities.
On the other hand, the Ministry has decided to postpone not only the regulation of crypto transactions but also the removal of tax advantages for some investment instruments for now.
